8 Factors Professionals Should Consider While Buying a Savings Plan

2021-01-12

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The perfect time for investments and savings is when you start earning. It is the beginning of your life, and though you do not find many responsibilities on your shoulder at the moment, further in life you will require money for a thousand different reasons. Hence, it is extremely significant to save whenever you get a chance. The days when you saved little pennies in your piggy bank are long gone. These are the times of smart decisions and sturdy future planning.

The best way to save is by investing in a savings plan or a life insurance plan. They are the safest ways of saving for your future or unseen occurrences. A savings plan is a life insurance plan which offers individuals an opportunity to accumulate funds for future purposes. Such plans help individuals to save in a disciplined manner for their short-term and long-term financial needs.

How to Choose the Best Savings Plan?

An individual has to save depending on their financial abilities and risk appetite. Also, guaranteed savings plans give you an advantage of insurance with wealth accumulation. The insurance advantage is that a death benefit is paid to the policy’s beneficiary in case of the insured’s sudden demise during the policy tenure.

Here are 8 factors to consider while choosing a savings plan:

1. Goals

You should keep in mind the objective behind investing in a savings plan and choose the plan which gives you the best benefits.

2. Risk Appetite

Make sure that you know the amount of risk you can bear. You will have to maintain a balance between risk and reward.

3. Liquidity

You need to make sure that your savings plan has enough liquidity and will provide you funds in emergency times.

4. Tax Deduction

It is essential to consider the tax benefit offered by the investment product. Investing in such products will reduce your tax amount and protect you in case of a medical emergency.

5. Diversity in Investment Product

Consider all the investment options, which serve your purpose and diversify the investments. This helps in reducing the risk associated with a savings plan.

6. Keep a Check on the Portfolio of the Plan

Ensure to keep a check on the portfolio investments and returns at the end of the year and see if you can make any changes in your investment.

7. Charges Associated with a Savings Plan

It is essential to know about your saving plan’s costs and charges. The best kind of savings plan is the one that has minimum charges and flexible withdrawals.

8. Features of the Plan

Look for different benefits and incentives a savings plan offers. Choose the plan which has flexible options and will help you grow in life.

What are Some Best Saving Plans and Schemes in India?

There are different types of saving plans and schemes that you can choose from. There are Government schemes, bank policies and life insurance policies that allow you to grow and accumulate your wealth. It all depends on your financial requirements and goals.

Here are a few saving plans and schemes that you can consider buying:

1. Fixed Deposit

Over the years, fixed deposit is the most common and trusted way of saving amongst the Indians. You get an interest rate of 5.5%-7.5% with guaranteed returns. Fixed deposits are bank-based investment products and are closely monitored by RBI Bank, thus ensuring safety. Investors can avail of a loan against their FD investments at lower interest rates. The interest rate for an FD investment is fixed at the time of opening the account but it can fluctuate throughout the year.

2. Recurring Deposit

A recurring deposit is a term deposit which a bank offers. In this type of savings plan, investors deposit money regularly and earn high returns upon maturity. The interest rate is between 4.5%-6.5%, with guaranteed returns. The minimum investment is Rs 500 and the maximum investment can be up to Rs. 1 lakh. Recurring Deposits offer higher interest rates to senior citizens.

Also Read - Difference Between RD and FD

3. National Saving Certificate

It is a fixed income investment plan, which can be opened with any post office. You get tax exemption benefits along with wealth accumulation. The National Savings Certificate is perfect for mid-income investors, as there is low risk.

4. National Savings Scheme

The Government supports the National Savings Scheme, and in this scheme, the total assured amount is paid after the completion of its maturity tenure. Furthermore, the applicable interest rate is compounded annually. Along with saving funds, you get the benefit of tax exemption.

5. Public Provident Fund

Public Provident Funds (PPF) is an initiative of the National Saving Organization, offering a term period of 15 years. It is one of the safest options of investment, with a fixed interest rate of 7.79%. The interest and the maximum limit of funds i.e. 1.5 lakhs, both are tax exempted. Another advantage of PPF is that it is quite flexible and can be transferred from any bank or post office to another bank and post office. The minimum contribution allowed is Rs. 500 and the maximum is Rs. 1.5 lakhs. It is the most selected savings plan.

6. Post Office Saving Scheme

If you are someone with a low-risk appetite, this is the guaranteed saving plan for you. It is the most relied on and secure saving plan, with the benefit of high-returns. The post office saving scheme is easily accessible and completely hassle-free. A POSS Account can be opened in the name of a minor. It has an interest rate of 4%.

7. Employee Provident Fund

The Employee Provident Fund was introduced by the Employee Provident Fund Organization, especially for salaried individuals. It is the perfect type of savings plan for youth, who have currently embarked on the journey of earning money in the corporate sector. In this, the salaried individuals have to invest funds in the Provident Fund account. The EPF enables individuals to save for their retirement and life after retirement. The financial contributions are made from the salary of the employee. The contribution is 12% of the salary, and the employer contributes a similar amount. The annual interest rate ranges between 8%-12%.

8. Endowment Plans

The most popular savings plan in the insurance sector is the Endowment Plan. Endowment Plans are regular savings plans to build an entity and give guaranteed maturity with exceptional benefits. Furthermore, they cover the insurance risk with additional riders to have a reliable source of funds when something goes wrong. The returns in this plan are similar to fixed yield and deposits.

There are too many options to choose from when it comes to buy the best savings plan. The only thing you can do is compare these savings plans online and choose the one which suits you the best. You can use investment calculators to calculate your investment needs and choose accordingly.

Guaranteed Savings Plans is essential for a better future in this era of extravagance and expensive living standards. They give guaranteed returns with great benefits. Savings bring stability to your life and help you enhance the way you live. You only live once, so why not save and live a peaceful life!

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